Stability is returning to the city
The London residential property market remains a complex and dynamic environment, with varying trends and factors affecting different areas and segments of the market. Following the fallout of the disastrous autumn 2022 mini-budget and the turbulence in the wider economy that it caused, house price growth slowed sharply. This continued to ease in early months of the year due to more muted buyer demand and higher mortgage costs.
However, the central London residential property market has stabilised, with average property prices holding steady which has continued to rebalance in a calm, measured way. Despite the challenges in the wider economy, there are positive signs for the central London market. Demand is increasing, fuelled by City workers, as the ‘return to the office’ trend has continued. Demand from overseas buyers continues, in particular Americans taking advantage of the strength of the US dollar and an easing in prices. Even with rising interest rates and underlying inflation putting pressure on household finances, there is a growing feeling that both are close to their peak, if not there already.
The apartment market, which had been hit hard during Covid-19 as a result of the ‘search for space’ amongst buyers, is starting to show more activity again. Demand is being driven by the resumption of office life, as well as investors. With values still 13% below their 2015 peak, buyers see an opportunity in this market.
The gap between buyer and seller expectations on price looks to have widened. Realistic pricing will be crucial to maintain momentum and activity for the rest of this year, particularly as supply and demand dynamics shift. Some demotivated vendors are opting against price cuts and are withdrawing their property from the market instead. Buyers are not feeling the same urgency that they felt last year and they are happy to bide their time to find the right home at the right price.
The rental market remains strong as the imbalance of supply and demand widens. London is a major economic hub and a popular destination for both domestic and international migrants. This strong demand is outpacing the supply of rental properties, which is driving up rents by an average of 14% in the past year, with some reports of up to 40%. Another factor is the rising cost of living, making it more difficult for people to afford to buy a home, which is pushing up demand for rental properties.
In May we hosted the 17th annual London and Country Property Show, which has proved a valuable opportunity for prospective purchasers looking to escape the hustle and bustle of the city to browse boltholes across Britain. The annual attendance exemplifies the continued interest in moving out of the capital, with the South East, and Surrey in particular, still the destination of choice for many. At our street level office located in the heart of St James’s, we are in a unique position to harness potential purchasers looking to swap London life for country life or to purchase a bolt-hole.